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1 I 1 Council Meeting Minutes May 12, 1987 Krueger reviewed staff report for a purchase agreement for a va- cant parcel of land in Tax Increment Financing District No.6 which relates to the next item on the agenda. Motion by Gunderman, seconded by Williams, to AUTHORIZE THE MAYOR AND THE CITY MANAGER TO EXECUTE A PURCHASE AGREEMENT WITH RAYMOND BLANSKI FOR THE VACANT PROPERTY IN THE SOUTHEAST QUADRANT OF TENTH STREET N.W. AND 11TH AVENUE N.W. IN THE AMOUNT OF $20,000.00 IN- CLUDING THE ADDENDUM TO THE PURCHASE AGREEMENT. 5 Ayes - 0 Nayes, Motion Carried Locke reviewed staff report concerning a development agreement with Richard Brama, noting it is anticipated the $1,075,000 project (generating $30-35,000 per year in tax increment, which is consistent with the targeted amount we have planned for this site) would be under construction this year and be on the tax rolls as of January 1, 1988; and reported Jim O'Meara of O'Connor & Hannon drafted the agreement and is here to answer questions. Locke indicated the technical analysis was not done in the stan- dard way for this project primarily because when the District was set up two years ago, the expenses incurred in acquiring the pro- perty is no longer a question in attempting to balance -the pro- ject; and indicated the analysis was done as part of the overall development district financial planning with the key ingredient being to get as much value on the property as we can as quickly as we can. Locke then indicated a $1 million project is what had been targeted for this piece of the overall District. Based on the financial analysis, Benke asked if all of the values are agreed to in the contract in terms of cash flow, as opposed to the tax rate sensitive issues. Locke stated the city is guaran- teed the minimum valuation; with this project, because of the bond money, we are not in a position to specifically require a guaran- teed amount to cover the bond amount, so the Agreement has been structured based on the minimum valuation and an Assessment Agree- ment signed to cover that amount. Benke asked what happens if legislation changes the property tax assessment ratio; Locke indicated that would affect our increment collected. In response to Benke's r~quest for the definition of protection in the agreement, O'Meara stated the Agreement calls for selling the land for $1.00 which is the major extent of the public assistance; the other protection is the Assessment Agreement; all than can be guaranteed are the market values which is the starting point for property taxes (then you go to assessed value and mill rates); does not have a guarantee by the developer to pay the city a sum- certain by way of property taxes or payments in lieu of those taxes; with this project we are dealing with tax exempt proceeds, which, if you try to guarantee the payment back by the developer of sufficient monies to in turn payoff your bonds, you are get- ting into private parties guaranteeing tax exempt bonds. Page 11 Purchase Agreement TID No. 6 Blanski Report 87-132 Development Agree- ment - Brama Report 87-133 Resolution 87-55